April's Shower of Incentives Losing Effectiveness, Edmunds.com Reports
By Michelle Krebs May 3, 2010While some automakers carried over their rather hefty incentive programs from March into April, including popular zero-percent financing and discounted leases, their effectiveness appears to be waning, according to estimates by Edmunds.com.
"The automakers that need extra marketing support will have to pull out a new trick for May," said Jessica Caldwell, Edmunds.com's director of Industry Analysis.
Industrywide, manufacturer incentives dropped in April from last April and March. Sales, being reported by automakers Monday, are forecasted to be well ahead of last April but slightly down from March.
Honda may prove the exception. Its incentives hit a record high in April and its sales may be up.
Industrywide, the average incentive was $2,654 per vehicle in Apri, down $152, or 5.4 percent, from March and down $403, or 13.2 percent, from April 2009.
Of the Big 7 automakers, Ford, General Motors and Hyundai all had incentives that were lower in April than last April as well as March.
Honda had incentives that rose in April from April 2009 and rose between March and April of this year as well. Honda incentives, while still lower per vehicle than any of the Big 7 set a new record of $1,767 per vehicle in April.
Honda, Mini, Porsche and Toyota, who are traditionally very conservative in their offers, currently have incentives that -- while not high compared with the industry -- are more than the brands typically spend. Meanwhile, companies with momentum and that generall have higher incentives anyway, such as Ford, General Motors and Hyundai, were able to cut back on spending.
Chrysler and Nissan had a mixed bag. Both had incentives that were lower than a year ago but up from March.
In April, the industry's aggregate incentive spending is estimated to have totaled approximately $2.62 billion, down 12.3 percent from March. Chrysler, Ford and General Motors spent an aggregate of $1.4 billion, or 54.1 percent of the total; Japanese manufacturers spent $859 million, or 32.7 percent; European manufacturers spent $204 million, or 7.8 percent; and Korean manufacturers spent $144 million, or 5.5 percent.
Combined incentives spending for domestic manufacturers averaged $3,286 per vehicle, down from $3,410 in March 2010.
From March to April, European automakers decreased incentives spending by $235 to $2,536 per vehicle sold; Japanese automakers decreased incentives spending by $122 to $2,181 per vehicle sold; and Korean automakers decreased incentives spending by $390 to $1,792 per vehicle sold.
Among vehicle segments, large trucks had the highest average incentives, $4,471 per vehicle sold, followed by luxury car at $3,526. Subcompact cars had the lowest average incentives per vehicle sold, $1,350, followed by sport cars at $1,428. Analysis of incentives expenditures as a percentage of average sticker price for each segment shows large trucks averaged the highest, 13.1 percent, followed by large cars at 11.2 percent of sticker price. Premium luxury cars averaged the lowest with 2.8 percent and premium sport cars followed with 3.6 percent of sticker price.
Comparing all brands, Scion spent the least, $406 followed by Subaru at $737 per vehicle sold. At the other end of the spectrum, Saab spent the most, $6,261, followed by Hummer at $5,674 per vehicle sold. Relative to their vehicle prices, Saab and smart spent the most, 15.9 percent and 15.2 percent of sticker price, respectively; while Scion spent 2.3 and Porsche spent 2.7 percent.
Edmunds.com's monthly True Cost of Incentives (TCI) report takes into account all automakers' various U.S. incentives programs, including subvented interest rates and lease programs, as well as cash rebates to consumers and dealers. To ensure the greatest possible accuracy, Edmunds.com bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used.
LEAVE A COMMENT
Click here to comment on this entry.It seems that the text of the article states that Toyota's incentive increased month-over-month but in the table it shows a decline. Am I reading that wrong? Maybe one is Toyota brand and other is TMS? It also seems that the above Mar10 Toyota incentive amount differs materially from last month's article which showed 2,256.
Average incentive prices for each automaker dont tell you anything. Month after month Edmunds tells us how Honda and Toyota are offering less incentives than the competition while failing to acknowledge those automakers sell far fewer trucks. Honda doesn't sell one real truck or BOF SUV so of course their average incentive figure is going to be the lowest. What matters is discounts relative to MSRP. By that measure Honda is probably near the top of the heap in terms of incentives. You have to take the makeup of the lineup into account. I'm sure BMW and MB have higher incentives than GM or Ford because they sell far more expensive vehicles.
whats interesting is that Nissan and Toyota are right near the industry average which is not a good sign for them. When you factor in how both companies sell far more cars (lower priced) than pickups and SUVs it means they are discounting heavily with respect to sticker price.
1487: who buys a car from MSRP though? What does it matter to compare rebates in relation to MSRP when very few cars are selling for MSRP these days? Just to give you an example I paid 4,000 dollars under MSRP and 1700 dollars under invoice for my 2007 Mazda 6 I Sport. I got the 1500 dollar factory rebate.
Your probably right that BMW and Mercedes do give more incentives than GM or Ford because of selling more expensive vehicles. I think that BMW and Mercedes load on cash upfront for people to lease their cars. Am I right on that point?
On other points Ford isn;t really lowering incentive away from their domestic competitors too much. Hyundai has lowered their incentive spending since the new versions of Tuscon and Sonata have debut I think. I think its is troubling for Toyota to spending as much as they are on incentives but I think they had to gain customers as fast as they could after all the trouble they had with gas pedals. Remember how long it took for Audi to get a solid reputation back after its unintended acceleration incidents in the mid to late 80's? I don't think Toyota wanted to wait that long as Audi did to get its reputation back. Chrysler has lowered its incentives since the calendar year has started.
Toyota is keeping customers in the fold but they will pay a price. Once you offer aggressive discounts people expect them on everything except new models. Toyota has little in the way of new product coming this year which means if they want to sustain sales incentives are going to be required. this damages resale value and profitability. Toyota has been saying this is a short term thing but they are now going into their 3rd month of 0% financing across the board. Ford nor GM nor Hyundai are offering 0% across the board.
Incentives should be displayed as a percentage of transaction price or something similar. Showing absolute figures is pointless since there is not parity in the sales mix of the Big 7. If you compare BMW incentives (in absolute terms) to Suburu or Mazda you are going to find BMW is offering far more money per vehicle. This is to be expected based on the price of the vehicles. BAsed on what I've seen in the past BMW and MB are offering $4k-$5k per vehicle in incentives.
@justinknight20 Article has been updated to clarify. Numbers in the table are, and always were, correct. Thanks for the comment!
ADD A COMMENT